DDIT (I.T) 2(1), MUMBAI V. M/s. TUV MANAGEMENT SERVICES GMBH (FORMERLY TUV QUALITIES MANAGEMENT GMBH ), MUMBAI

ITA 7575/MUM/2004

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7338 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Assessment Year: 2000-2001
• Appeal Filed On: 21-10-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 234B; 195; 264

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI B. RAMAKO TAIAH ,(AM) ITA NO.7575/MUM/2004 ASSESSMENT YEAR : 2000-01 DY. DIRECTOR OF INCOME TAX(INTL. TAXATION)-2(1) ROOM NO.120, SCINDIA HOUSE BALLARD ESTATE, N.M. ROAD MUMBAI-400 038. ..( APPELLANT ) VS. M/S. TUV MANAGEMENT SERVICES GMBH (FORMERLY TUV QUALITIES MANAGEMENT GMBH) C/O., M/S. BHARAT S. RAUT & CO. KPMG HOUSE KAMALA MILLS COMPOUND 448, SENAPATI BAPAT MARG LOWER PAREL MUMBAI-400 013. ..( RESPONDENT ) P.A. NO. (AAACT 4006 F) APPELLANT BY : SHRI S.M. KESHKAMAT RESPONDENT BY : SHRI NI RAJ SHETH O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 19.7.2004 PASSED BY THE CIT(A) FOR ASSESSMENT YEAR 2000-01. BY THE CONSENT OF BOTH THE PARTIES THIS APPEA L IS BEING HEARD AND DISPOSED OF BY THIS ORDER. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSE E IS A NON-RESIDENT COMPANY. IT IS ENGAGED IN THE BUSINESS OF I SO 9000 CERTIFICATION WHICH IS A SERVICE INDUSTRY. THE RETURN W AS FILED DECLARING ITA NO.7575/M/04 A.Y:00-01 2 A LOSS OF RS.18,05,259/-. HOWEVER THE ASSESSMENT WAS COMPLET ED AT AN INCOME OF RS.1,12,31,820/-, VIDE ORDER DATED 28.2. 2003 PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). WHIL E MAKING THE ASSESSMENT THE AO ALSO CHARGED INTEREST U/S.234B OF THE ACT . ON APPEAL, BEFORE THE LD. CIT(A) THE ASSESSEE CONTENDED THA T THE ASSESSEE IS A FOREIGN COMPANY. IN TERMS OF SECTION 195 OF THE ACT, ITS ENTIRE INCOME IS SUBJECT TO WITHHOLDING TAX. ACCORDINGLY , NO ADVANCE TAX WAS PAYABLE BY THE ASSESSEE AND THE ASSESSEE WAS NOT LIAB LE FOR ANY INTEREST UNDER SECTION 234B OF THE I.T. ACT. RELIAN CE IN THIS REGARD HAS ALSO BEEN PLACED ON M.M. RATNAM VS. ITO 62 ITD 21; CIT VS. MADRAS FERTILIZERS LTD. 149 ITR 703; CIT VS. RANOLI I NVESTMENT (P) LTD., AND OTHER 235 ITR 433; ASIA SATELLITE TELECOMMU NICATIONS LTD. VS. DCIT 85 ITD 478; SEDCO FOREIGN INTERNATIONAL DRIL LING INC. VS. DCIT 67 TTJ 670. WITHOUT PREJUDICE TO THE ABOVE, IT WAS ALSO POINTED OUT THAT THE AO HAS LEVIED INTEREST UNDER SECTION 234B AT 1.5% PER MONTH FOR THE PERIOD 1 APRIL, 2000 TO 31 MAY, 2001 INSTEAD OF THE CORRECT RATE OF 1.25% PER MONTH I.E. THE RATE PREVAIL ING ON THE DATE OF ASSESSMENT AND RELIANCE WAS ALSO PLACED IN THE CASE OF ADDL. CIT VS. MADURA SOURTH INDIA CORPORATION(P) LTD. 110 ITR 322 . THE LD. CIT(A) FOLLOWING THE DECISION HELD THAT INTEREST UNDER SECTION 234B IS NOT LIABLE TO BE LEVIED IN THE PRESENT CASE AND ACCORDINGLY DIRECTED THE AO TO DELETE THE LEVY OF INTEREST UNDER SECTION 234B. ITA NO.7575/M/04 A.Y:00-01 3 3. BEING AGGRIEVED, BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUND OF APPEAL:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE I NTEREST CHARGE U/S.234B OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT SINCE THE TAXES WERE DEDUCTIBLE AT SOUR CE FROM PAYMENTS MADE BY THE INDIAN COMPANIES, THE ASSESSEE CAN NOT BE SADDLED WITH BURDEN OF THE ABOV E INTEREST, IGNORING THE FACT. A. THAT SINCE THE TAX WAS NOT DEDUCTED AT SOURCE IT WAS OBLIGATORY ON THE PART OF THE ASSESSEE TO MAKE THE DEFICIT GOOD BY WAY OF MAKING PAYMENT TOWARDS ADVANCE TAX; B. THAT SINCE THE ASSESSEE FAILED TO PAY THE ADVANCE TAX, THE PROVISIONS OF SECTION 234B OF THE INCOME TAX ACT, 1961 HAVE BEEN CORRECTLY APPLIED BY THE ASSESSING OFFICER . 4. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE ORD ER OF THE AO. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITS THAT THE ISSUE IS FULLY COVERED AGAINST T HE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBL E JURISDICTIONAL HIGH COURT IN DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) VS. NGC NETWORK ASIA LLC (2009) 313 ITR 187(BOM). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT IN TERMS OF SEC.195 OF THE ACT THE ENTIRE I NCOME OF THE ASSESSEE IS SUBJECT TO DEDUCTION OF TAX AT SOURCE. ACCORDINGL Y THE ITA NO.7575/M/04 A.Y:00-01 4 ASSESSEE WAS NOT LIABLE TO PAY ADVANCE TAX . RECENTLY THE HONBLE JURISDICTIONAL HIGH COURT IN DIRECTOR OF INCOME TAX (INT ERNATIONAL TAXATION) VS. NGC NETWORK ASIA LLC (2009) 313 ITR 187 (BOM.), ON THE IDENTICAL ISSUE, HAS HELD VIDE PLACITUM 8 (AT PAGE 190 OF THE ITR) AS UNDER : WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEW TAKEN IN THE CASE OF CIT VS. SEDCO FOREX INTERNATIO NAL DRILLING CO. LTD.(2003) 264 ITR 320, BY THE UTTARAN CHAL HIGH COURT. WE ARE CLEARLY OF THE OPINION THAT WHEN A DUTY IS CAST ON THE PAYER TO PAY THE TAX AT SOURCE, ON FAILURE, NO INTEREST CAN BE IMPOSED ON THE PAYEE- ASSESSEE. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT O N RECORD BY THE REVENUE, WE, RESPECTFULLY FOLLOWING THE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT (SUPRA) HOLD THAT WHEN A DUTY IS CAST ON THE PAYER TO PAY THE TAX AT SOURCE, ON FAILURE, NO INTERE ST CAN BE IMPOSED ON THE ASSESSEE AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) IN DELETING THE INTEREST CHARGED U/S.2 34B OF THE ACT. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. 7. IN THE RESULT, THE REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.3.2010 SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 26.3.2010. JV. ITA NO.7575/M/04 A.Y:00-01 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 23.3.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 23.3.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 26.3.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 29.3.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER